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How Copyright, Contract, and Technology Shapethe Business of Digital Media – A Case Study

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APER V

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Please send comments to digital-media@cyber.law.harvard.edu

This Green Paper provides an initial analysis of Apple’s Online Music Store iTunes. The exploratory case study presented in this document is

research in progress

. Comments and questions are encouraged. The paper analyzes relevant law to achieve deeper understanding of current shifts in the digital media landscape, but does

not

provide legal advice.

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Research Team

This Green Paper is a case study developed by the Digital Media Project team at the Berkman Centerfor Internet and Society at Harvard Law School. Gartner|G2 served as our research partner in this venture. Particular thanks to Mike McGuire of Gartner|G2.

Digital Media Project Principal Investigator

William W. Fisher, IIIHale and Dorr Professor of Intellectual Property Law, Harvard Law School

Authors

Urs Gasser, Derek Bambauer, Jacqueline Harlow, Charles Hoffmann, Renny Hwang, Georg Krog,Stephen Mohr, Ivan Reidel, Derek Slater, C. Lee Wilson, and John Palfrey

Communications Director

Mary BridgesDraft as of March 30, 2004

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Contents

Contents.................................................................................................................................................2

Introduction...........................................................................................................................................6

Abstract...........................................................................................................................................................6 A. Background................................................................................................................................................6B. Objectives and Scope...............................................................................................................................7C. Overview of the iTunes Music Store.....................................................................................................81. Pricing.....................................................................................................................................................92. Song Catalog........................................................................................................................................103. Ease of Use..........................................................................................................................................104. Digital Rights Management System..................................................................................................105. Extra Features.....................................................................................................................................11

Part I: Contract-Copyright Interplay.....................................................................................................12

A. Summary: Where Copyright Permits, Contracts May Prohibit........................................................121. Copyright..............................................................................................................................................122. Contract................................................................................................................................................13B. Effects of Contract versus Copyright Tension on iTunes................................................................14C. Copyright versus Contract in the United States.................................................................................15D. Copyright versus Contract in Europe.................................................................................................181. European Union..................................................................................................................................18a. Copyright Regulation by the European Union..........................................................................18b. Contract Regulation by the European Union............................................................................19c. Contractual Modification of Copyright Entitlements in the European Union.....................21d. Example: Copyright-Contract Interaction in Germany............................................................222. Summary of Business Impact............................................................................................................23E. Copyright versus Contract in Asian Countries...................................................................................231. Japan.....................................................................................................................................................23a. Copyright in Japan..........................................................................................................................24b. Contract in Japan............................................................................................................................25c. Contractual Modification of Copyright Entitlements in Japan................................................26d. Business Impact of Contract and Copyright on iTunes in Japan............................................272. China.....................................................................................................................................................28a. Copyright in China.........................................................................................................................28b. Contract in China...........................................................................................................................29c. Contractual Modification of Copyright Entitlements in China...............................................30d. Business Impact of Contract and Copyright on iTunes in China...........................................31F. Conclusion...............................................................................................................................................32

Part II: Digital Rights Management.....................................................................................................33

A. Introduction............................................................................................................................................33B. How is DRM Protected by Law?..........................................................................................................331. United States........................................................................................................................................34

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